2021-12-28

West Bank

West Bank / Announcement / Core Program / position paper

Extensive demands to refrain from publishing the Decree-Law on companies, given the absence of the infrastructure and the factors necessary for its implementation

The requirements of electronic registration and compliance of companies with the requirements of the Decree-Law, and the preparation and issuance of the regulations that must be issued in accordance with its provisions, requires a period of no less than two years in accordance with the explicit texts of the Decree-Law that has not yet been published, which contains flaws and legislative loopholes that require its non-publication, according to the consensus of 62 participants in a meeting devoted to reading the Decree-Law to determine the extent of the need for its issuance and enforcement in the absence of the Legislative Council, and the absence of the compelling reasons for implementing Article 43 of the Basic Law, which requires an urgent need that cannot be delayed, is a reason for issuing it.

Among the most prominent gaps, shortcomings, and negatives involved in the decree-Law are the texts related to the period of validity, implementation and readiness. Whereas the Decree-Law contained a text stating that it would enter into force three months after its publication in the Official Gazette, while it includes texts indicating the necessity of issuing regulations necessary for its implementation within a period of one year from the date of its entry into force, in addition to the need to establish an electronic registration system that takes up to two years from the date of entry into force, and the necessity of correcting the conditions of companies and their internal systems in line with the provisions of the Decree-Law, which takes two years in accordance with its provisions, which makes the validity of the Decree-Law for the period of three months after its publication in contradiction to the requirements of providing the factors for its application and enforcement, and raises the question about the wisdom of the validity of the Decree-Law being after three months, while completing the necessary details for its enforcement requires a period of two years in support of its explicit texts, especially since the Decree-Law expressly repealed the applicable Companies Law.

How can a Decree-Law enter into force while the new in its provisions is the implementation of the non-ready and non-existent electronic registration system! Which needs to be prepared and activated for a period of two years in accordance with what is stated in the Decree-Law, noting that all the procedures for establishing companies, their life cycle and their termination are linked to their installation on the electronic registration system, which requires providing guarantees for its security from an electronic point of view after its establishment, in addition to what the Decree-Law referred which is the necessity of preparing and issuing systems required for its implementation, which takes at least one year to be ready.

It is noteworthy that the Decree-Law includes a text referring government companies to a private law without the need for that, especially since the privacy of public money is regulated in other valid legislation. The decree was not accompanied by a law with an explanatory memo outlining the legislative and economic philosophy behind some of the provisions it includes, such as those related to the division of companies that the Decree-Law allowed all companies to make, which may expose creditors’ guarantees to manipulation, especially since people companies are based on personal consideration in dealing with money companies. The Decree-Law also did not include a statement based on behavioral and economic studies that base its permission for the stock split or division, which is applied when the stock price rises significantly, which contradicts the reality of stock prices in Palestine.

The Decree-Law did not include a justification of its regulation of the differences resulting from the re-evaluation of financial assets and not considering them as part of the profits. Also, it did not include a regulation of the specific provisions of the foreigner’s contribution to the ownership of company shares, which may present the approved instructions regarding determining the foreigner’s contribution to no more than 49 % of the shares to be canceled and wasted with all the consequent sovereign risks. The Decree-Law in its current form will open the door wide for foreign ownership of more than 49% of the shares.

What is noteworthy in the Decree-Law is the low value of the fine contained therein, which ranges from one thousand to five thousand dollars, even if the crime is serious, such as the crimes of issuing fake budgets and financial statements or violating the reality of the company, the auditor’s manipulation of accounts, and the violation of profit distribution rules.

It is worth mentioning that the decree-law includes provisions that commission to the company's general assembly the power to intervene in the details of employee incentives in the company, in contradiction with the inclusion of the issue of incentives under the jurisdiction of the executive management in accordance with the human resources policy.

Given these loopholes and legislative flaws as well as the absence of a constitutional basis for issuing a Decree-Law and the lack of requirements and factors for its enforcement, the demand not to publish it becomes consistent with the validity of the law and deserves a response.

Issued on: 28/12/2021                                                                                                           MUSAWA